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The Politics of Endogenous Growth

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Author Info
Chetan Ghate (Indian Statistical Institute, Delhi)

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Abstract

Is it politically feasible for governments to engineer endogenous growth? This paper illustrates two reasonable political decision mechanisms by which fiscal policy generates endogenous growth with a single accumulable factor, and a constant returns to scale production technology without production externalities. In the first mechanism, policies are chosen by the government to maximize constituent support by raising aggregate income. In the second mechanism, policies are determined in a voting equilibrium where agents are concerned only with their own incomes. We demonstrate that policies that target aggregates generate balanced growth and are Pareto optimal. Policies chosen by the median voter also produce balanced growth, but result in public investment 50 percent below the socially optimal level. However, we identify a plausible restriction under which median voting replicates the socially optimal level. This shows that both mechanisms are linked through their effects on asset distribution.

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Publisher Info
Article provided by Berkeley Electronic Press in its journal Topics in Macroeconomics.

Volume (Year): 3 (2003)
Issue (Month): 1 ()
Pages: 1082-1082
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Related research
Keywords: Public Investment Positive Political Economy Median Voter Theorem Endogenous Growth

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Find related papers by JEL classification:
P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism

References listed on IDEAS
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Chetan Ghate, 2003. "The Politics of Endogenous Growth," Topics in Macroeconomics, Berkeley Electronic Press, vol. 3(1), pages 1082-1082. [Downloadable!] (restricted)
    Other versions:
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